Income inequality in America has been a hot topic over the past few years. So hot, in fact, that even Republicans have begun to talk about it. Everyone knows that income inequality is bad, and that it has gotten much worse, since the advent of Ronald Reagan’s “supply side economics” policies. But, in historical terms, just how bad is it?
According to the Pew Research Center, income inequality is now at its worst since 1928. The gulf between the rich and the rest of us has been steadily growing since the 1970’s. But it’s hard for many people to comprehend just how big that gulf is.
Quoctrung Bui of NPR has put together a chart that shows the tremendous income inequality that exists in the United States today, compared to the past 100 years.
Bui’s chart shows how, in the early to middle years of the 20th century, only the incomes of the bottom 90 percent of earners rose. Bui calls this the “great compression.” He says this was fueled by the post-war demand for low to moderately skilled workers, who were able to find good paying manufacturing jobs. High marginal tax rates kept incomes of the rich in check.
Matt O’Brien, in the April 20 Washington Post, observes that, between 1940 and 1970, the average income for the bottom 90 percent went from $12,000 to $33,000. During that same period, the average income for the top 10 percent remained right around $300,000. With top tax rates that reached as high as 94 percent, it wasn’t worth it for executives to take huge salaries. Also, most executives of that era felt that receiving a huge salary was something that it just wasn’t proper to do. O’Brien tells how, in 1960, George Romney turned down a $100,000 bonus, because he didn’t think that he, or anyone, needed to make that much more.
Since the “Reagan Revolution,” top tax rates have fallen, and executive salaries have increased dramatically. At the same time, thanks to the loss of manufacturing jobs, and the decline in union membership, wages for the bottom 90 percent have stagnated. With the end of the Cold War, and global competition, American workers have been forced to compete with foreign workers who make a fraction of their pay. Large corporations have taken advantage of globalization to increase profits, and top executives rake in the money, while workers often wonder if they’ll even continue to have a job; never mind a fatter pay check.
It’s easy to see, in this chart, that “trickle down” economics has been a horrible failure, at the expense of the American middle class. Yet, America continues down the trickle down road, pushed by Republicans whose fat cat donors have a vested interest in keeping their incomes high, and their tax burden low.
On the left of the chart, is the average income for the bottom 90 percent of earners. On the bottom, is the income of the top one percent. You can see how, for years, incomes increased for most lower income earners, while the incomes of the rich remained stagnant. Around 1980, that all changed, and in the years since, the rich have gotten much richer, while everyone else has been left, desperately trying to keep their heads above water.
Featured image via Fisz.hu